15. MONICO PUENTEBELLA, ET AL. vs. NEGROS COAL CO., LTD.

, ET AL
Facts:
These are appeals by both parties from the following decision of the Court of First Instance of
Occidental Negros:
Due to the close connection between these two cases, they were tried jointly by agreement
of the parties. They are actions for there recovery of damages for the sum of P50,000 and
P40,000, respectively.
It is alleged that the plaintiffs, having bound themselves to plant sugar cane which the
defendants, in turn, promised to mill in a sugar central which they were to erect, complied
with their contract, but the latter did not erect the central in due time, this delay causing the
former to lose all of the said crop. It is further prayed that the contracts executed for that
purpose be cancelled.
It is alleged in the answer of the defendants that the Negros Coal Co., Ltd., was dissolved on
June 16, 1923, by an order of the Court of First Instance of Iloilo, but that its rights, actions
and obligations were placed in charge of the commercial firm of Hijos de I. de la Rama &
Co., of which the defendant Esteban de la Rama is the manager; that due to force majeure,
fortuitous events, and other circumstances independent of the will of the defendants, they
were unable to complete the construction of the sugar central within due time and that the
plaintiffs, after the construction of the central, refused to mill their cane and did nothing to
lessen their losses.
In the first case, they presented a counterclaim for P18,000 in damages for violation of the
milling contract, and a cross-complaint for the foreclosure of the mortgage credits against
Juliana Puentebella Vda. De Ferrer, for the sum of P39,114.63 and a penalty of P5,867.19;
against Pedro Ferrer, for the sum of P19,557.30, and against Francisco Ferrer for the sum of
P19,557.30, plus P2,933.59 for attorney's fees and expenses of litigation. In the second
case, they likewise presented a counterclaim of P1,800 as damages for violation of the
milling contract, and a cross-complaint for the foreclosure of the mortgage credit for the sum
of P44,169.90, plus a penalty of P6,625.48.
And, moreover, in the first case it is alleged as a special defense, that it having been agreed
in the contract upon which the plaintiffs base their action, that before commencing any
litigation they would submit their differences to arbitrators, the plaintiffs have done nothing to
comply with this stipulation. Indeed, paragraph 17 of the contract, Exhibit A, reads as follows:
"That they shall submit each and every one of the differences that may arise between the
party of the first part and the party of the second part to the decision of arbitrators, two of
whom shall be selected by the party of the first part and two by the party of the second part,
who, in case of a disagreement, shall select a fifth arbitrator, and they shall respect and
abide by the decision of said arbitrators or any three of them, as the case may be."
As may be seen, this clause states absolutely, and not as a mere condition precedent to
judicial action, that all differences between the contracting parties shall be submitted to
arbitrators, who decision the parties shall respect and abide by, and the clause is, therefore,
void. (Rudolph Wahl & Co. vs. Donaldson, Sims & Co., 2 Phil., 301, and Teodoro

Vega vs. San Carlos Milling Co., Ltd., G.R. No. 21549, promulgated October 23, 1924.) This
is on one hand, while on the other are the documents, Exhibits 19, 20 and 21 executed
separately by the plaintiffs on the same date as Exhibit A, all representing mortgage loans,
and with the exception of Exhibit 20, they further more contain a stipulation on the part of
Hijos de I. dela Rama to finance the farm laborers of the plaintiffs and to mill the cane in the
sugar central of the Negros Coal Co., Ltd., but contain no agreement to submit the
differences that might arise between the parties to arbitrators. These documents constitute a
transaction of binding force, because they define the duty and obligation of each party, which
is not the case in Exhibit A, in which an option is left to the plaintiffs to miss or not to mill their
sugar cane in said central because, as may be inferred from its context, the purpose was
only to obtain, as the Negros Coal Co., Ltd., did obtain, the right of way on the plaintiffs' land.
At the trial of these cases the parties submitted a stipulation of facts, paragraph 5 of which,
literally, reads as follows:
"That the partnership denominated "Hijos de I. de la Rama" was organized in the 1907 for a
period of ten years; that said period having expired in 1917, Esteban de la Rama was
appointed liquidator of the property of the partnership by agreement between the members;
that after the liquidation had commenced, and before the year 1920, Esteban de la Rama
bought all the rights of his copartners in the property of the said firm in liquidation, to be paid
in installments, with the right to use the firm name, but with the obligation no to dispose of
the property of the firm in liquidation while the price stipulated in the contract of sale of rights
remained unpaid;" Esteban de la Rama being, therefore, according to this agreement, the
sole owner of the firm of Hijos de I. de la Rama, and having taken over the rights, actions
and obligations of the Negros Coal Co., Ltd., as alleged in the first paragraph of the answer,
it appears that he is at present in possession of all the rights, actions and obligations which
originated from contractual relations entered into both cases by the plaintiffs on the one side
and the, then, corporation, known as the Negros Coal Co., Ltd., and the Hijos de I. de la
Rama on the other, by virtue of the documents, Exhibits A, B, 19, 20 and 21.
On March 7, 1924, after the plaintiffs had filed their complaint in case No. 2911, the plaintiff
Pedro Ferrer died, and intestate proceedings having been instituted, the court, upon motion,
and under date of August 23, 1924, ordered the substitution, in this case, of the deceased
Pedro Ferrer by Francisco Ferrer, judicial administrator of his estate.
Exhibit A is a contract executed in Iloilo by Esteban de la Rama, in his capacity as President
of the Negros Coal Co., Ltd., on the one hand, and by Juliana Puentebella, Pedro Ferrer and
Francisco Ferrer on the other, which contract contains, among other things, a stipulation that
the party of the first part shall erect a sugar central in the sitio denominated Labilabi,
Escalante, Occidental Negros, with a railway across the land of the party of the second part
for the transportation of sugar cane to the central, the said party of the second part binding
itself to mill the sugar cane in said central, receiving 45 per cent of the total amount of the
sugar manufactured; and the party of the second part grants an easement of way on their
land to the party of the first part and, at its option, 'to mill or not to mill' its cane in the said
sugar central.
Exhibits 19, 20 and 21, as has already been stated, are contracts of mortgage loan executed
separately, the first by Juliana Puentebella, the second by Pedro Ferrer and the third by
Francisco Ferrer, as debtors, and by the Hijos de I. dela Rama, as creditor in each of said
contract, it being further stipulated in the first and the third contract that the loans were to be
used exclusively in the production of sugar cane on the mortgaged land; that the mortgagors
bound themselves to mill their sugar cane every year in course of construction, the central to

receive 45 per cent of the total sugar manufactured from said cane, and that the amounts
borrowed should be amortized by an annual payments during ten agricultural harvests; and
while, as has been said, Exhibit 20 is simply a mortgage loan by reason of its date,
notwithstanding that it is the same as that of Exhibits A, 19 and 21, or July 23, 1920, from the
date of the notarial acknowledgment in connection with Exhibit A, executed jointly by the
plaintiffs in case No. 2911, it can be inferred that this loan, as the others, was made by the
commercial firm of Hijos de I. de la Rama for the purpose of financing thehaciendas of the
plaintiffs for the cultivation of sugar cane and to supply the sugar central of the Negros Coal
Co., Ltd.
Exhibit B executed on June 17, 1920, by and between Monico and Luis Puentebella on the
one hand and Hijos de I. de la Rama on the other, is practically the same as Exhibits 19, and
21, and provides for a mortgage loan for agricultural purposes and milling in said central, but
with the following additional clause:
In case the proposed sugar central of the Negros Coal Co., Ltd., is not in position the first
year to mill the sugar cane of the mortgagor in time, the mortgagee binds itself to furnish the
mortgagor with the sum of from P20,000 to P pesos, Philippine currency, for the
erection, under the supervision of the mortgagors, of a 12-horse-power mill for grinding
muscovado sugar, and to install and equip the same with all the necessary material for the
operation and milling of muscovado sugar; in that case of their sugar cane planted in
Jonobjonob, Escalante, Occidental Negros, and the said mortagagees will receive one-third
of the sugar manufactured by the mortgagors in consideration of all of the foregoing.
By virtue of said contracts A, B, 19, 20 and 21, all of the plaintiffs in both cases tilled the
mortgaged land and planted sugar cane during the months of September, October,
November and December of 1920 and January of 1921 and, at about the time the cane was
ripe Monico Puentebella at various times advised De la Rama, by letter, that his cane was
ripening and he, therefore, demanded the erection of a mill for muscovado sugar in
accordance with the agreement in the clause quoted from Exhibit B, which brought forth the
following reply:
PROGRESO 28, ILOILO, March 29, 1921
MR. MONICO PUENTEBELLA
Bacolod, Occidental Negros
MY DEAR SIR: Replying to your letter of the 25th inst. which I have just received, I wish to state the
following: That the Escalante Central will be erected; in fact, it is also wish to state that about two
weeks ago all of the plans of said central were forwarded to Mr. Fortunato Fuentes, and that long
ago all of the bricks, both common and fireproofs, as well as the cement and lime were sent there.
Therefore, there is no need for you to worry about your sugar cane planted in Cervantes, for I have
more interest than you in milling it in order to recover the P30,000 which I have advanced to you for
said purpose.
Very respectfully,
E. DE LA RAMA
Mrs. Juliana Puentebella, in company with her son Francisco Ferrer, also made a trip to Iloilo in
March, 1922, for a conference with Esteban de la Rama and to advise him that their cane, as well as
the cane of her sons Pedro and Francisco was ripe and some of it over-ripe, and asked permission

to mill it in the San Carlos sugar Central, Occidental Negros, in view of the fact that neither the sugar
central of the Negros Coal Co., Ltd., nor the railway had been constructed, but Mr. De la Rama laid
down certain conditions which the petitioner considered burdensome; so nothing was done about
milling the cane in the San Carlos Central.
Esteban de la Rama while testifying concerning the petition of Mr. Monico Puentebella for the
construction of a muscovado sugar mill , said:
For various reasons. Because when Mr. Monico Puentebella required me to comply with this clause
of the contract, he did so at a time when I was building the central and I figured that the machinery
would be installed in my mill, as work had already been begun and Mr. Fuentes was looking for the
machinery and was to install it before Mr. Puentebella's cane had ripened and the P20,000 would not
be needed. In the second place, before that date, when Mr. Puentebella demanded the P20,000 of
me, I had received a letter from the Bank of the Philippine Islands. From the contents of the letter
received from the Bank of the Philippine Islands, I was of the opinion that said Bank was the owner
of the land and held Torrens title thereto, and that it did not understand why Mr. Puentebella was
cultivating this land which belonged to it without its permission, and that it did not understand why
Mr. Puentebella to make a contract with it; and as Mr. Puentebello refused to do so, I thought it
useless for us to meddle with a property which was not ours.
It having been positively stated in Exhibit B that the mortgagors Monico and Luis Puentebella are the
undivided coowners with the Hijos de I. de le Rama and the Bank of the Philippine Islands of the
mortgaged property, the last statement of Esteban de la Rama, in his testimony aboved quoted, that
he considered it useless to build the mill on the said land, appears to be merely an excuse for not
voluntarily complying with his obligation, and his estimate as to the completion of the central which
he was building having been made by himself alone, and without the concurrence of the other
contracting party, is not a sufficient reason for excusing him, for the fulfillment of a contract cannot be
left to the will of one of the contracting parties.
The result was that on account of the said reasoning of Mr. de la Rama with respect to the
Puentebellas and his demands upon the Ferrers, the cane belonging to both of them was left in the
fields without being milled, and with the exception of a small quantity belonging to the Puentebellas
which they had sent to the San Carlos Central for milling was drying out and deteriorating and
became a complete loss.
It is alleged, nevertheless, that the delay in the construction of the central was due to force majeure,
fortuitous events and other circumstances independent of the will of the defendants, in support of
which they attempted to prove that there had been a strike in the factory of George Fletcher & Co.,
Ltd., Derby, England, from whom they had ordered their machinery, which strike delayed matters, but
the evidence in this particular respect consists of reports from the agent of the defunct firm of the
Cooper Company, with offices in the Philippine Islands, through which company the said machinery
was contracted for, and, naturally, as it comes from an interested party and is, moreover, hearsay, it
is of little or no value. And even if it be considered competent evidence, the total loss of the plaintiffs'
crop cannot be attributed to force majeure, fortuitous events or other circumstances, for it was
provided in the construction of the central, a mill would be furnished for the manufacture of
muscovado sugar which would not only mill the cane of the Puentebellas, but also that of the
defendant Esteban de la Rama, and the same would have been done with the cane of the Ferrers,
because their lands adjoin.
It is also claimed that the frequent rains, inundations and crumbling of the earth considerably
interrupted the construction of the earth considerably interrupted the construction of the central, and,
judging from Exhibits 6-A to 6-X, which are all letters from the person in charge of its construction,

and which include the period from November 5, 1920 to January 22, 1922, approximately one year
and four months, it rained almost incessantly, which appears to have been an unusual occurrence of
which the Weather Bureau should have had knowledge, and whose opinion would have been more
impartial.
Conceding, however, a certain value to this contention, it would, nevertheless, seem that these
circumstances should have caused Mr. De la Rama to take all the necessary precautions for the
purpose of insuring the milling of the plaintiffs' crop, especially so as it appears from the following
letter that he himself foresaw losses:
February 18, 1921
THE COOPER COMPANY
Iloilo, Iloilo , P. I.
MY DEAR SIRS: In view of the long delay in the manufacture of the equipment which we have
contracted for our central at Escalante, a delay which is almost double the time specified in the
contract and which is causing us a great loss in not being able to mill at present, we have decided to
cancel the order for said equipment, and you will do us the favor of returning the P50,000 which we
advanced at the time of signing the contract, together with the interest thereon.
Yours sincerely,
HIJOS DE I. DE LA RAMA
BY E. DE LA RAMA
It is likewise alleged that after the central had been constructed the plaintiffs refused to mill their
cane there and did nothing to minimized their losses, but the delay in constructing the said central
having been expressly admitted in their previous defense, the conclusion is that it was completed
after the season was over and the cane was over-ripe, for which reason, although the defendants
were notified that the central would begin to operate within the first fifteen days of September, 1922,
they cease to cut their cane, because it was already useless and dried out as stated in the following
letters of the plaintiffs:
BACOLOD, September 2, 1922.
Messrs. HIJOS DE I. DE LA RAMA
P. O. Box 298
Iloilo, Iloilo
MY DEAR SIRS: In answer to your letter of the 26th of last month, I have to inform you that my cane
is completely dried out and useless for milling purposes. You are not ignorant of cause of this
unfortunate result of my efforts in planting cane on the Cervantes Estate, for I have not even been
able to produce muscovado sugar from it on account of your failure to comply with that part of our
contract which binds you to make us a further loan of P20,000 in order to obtain machinery for that
purpose in case of delay in the completion of your central, as, in fact, was the case. This advice from
you has come extremely late and at a time when it is impossible to remedy the situation, as it is
impossible to revive dead cane. You know very well that these disastrous consequences of my
affairs are due to no fault of mine, but are due to your failure in not complying with your part.
Very respectfully,

ESCALANTE, OCCIDENTAL NEGROS, November 2, 1925

MR. FORTUNATO FUENTES

Manager of the H. I. R. Central
Labilabi, Escalante, Occidental Negros.
MY DEAR SIR: In answer to your favor of September 28th last, I must advise you that the fields
planted with sugar cane, according to the terms of our contract to mill it in the H. I. R. Central, are
completely dead on account of not having been milled in said central at the proper time, for which
reason it has been impossible to plant again, the non-fulfillment of said contract having caused
unconsiderable damage.
Very respectfully,
FRANCISCO FERRER
Administrator of J. Vda. de
Ferrer and Pedro Ferrer
It is said in these exhibits that the cane was useless, dried out and dead, which fact is proven by
Exhibits D, E and F, communications to Monico Puentebella from the San Carlos Central to which
Central, as already stated, Mr. Puentebella sent a few tons of cane for milling, which letters, dated
from April 2 to 9, 1922, imply that they sent the cane there not later than the month of March, and, as
may be seen from the letters, the milling was a failure and a complete loss, because said cane was
already over-ripe and because it was sent from Escalante to the municipality of San Carlos for
shipment, which is the only means of transportation, even today, between the said towns, and very
costly; and considering that the cane which was sent to idea may be formed of the condition of the
plaintiffs' sugar-cane fields in said month of April, and so disastrous was this shipment that,
according to the testimony of Luis Puentebella, the share of the agriculturist was not even sufficient
to cover the expenses.
On the other hand, Francisco Ferrer, after the conference of him and his mother with Esteban de la
Rama, attempted to mill his cane in the sugar mill on the neighbor boring estate belonging to
Rosario Sanz, but the latter refused to do so because the season was over.
If therefore, the plaintiffs' cane was over-ripe in March, 1922 it seems certain that when they were
notified on September 28, 1922 (Exhibit P addressed to the Ferrers) and on August 26, 1922 (Exhibit
16 addressed to Monico to mill next September), or when the central commenced to produce sugar
on September 15, 1922, in accordance with the stipulation of facts, the cane at the end of this period
and useless for milling, and moreover if in March, according to the result of the milling at the San
Carlos, it did not given an average yield and was milled at a loss, we are more than justified in
saying that five and a half months afterwards the yield would have been almost nothing.
The witnesses for the defendants testified, however, that cane on virgin land used for the cultivation
of sugar cane, lasts about eighteen months and Mr. De la Rama stretched it to 24 months, which
implies that the plaintiffs cane was still in condition to be milled when the central commenced to
operate in September, 1922, because according to the evidence, the plaintiffs' cane was planted in
September, October, November and December, 1920; and in January, 1921; but applying this same
theory to the plaintiffs first plantings, in April, 1922, they twenty months old, or more than eighteen,
for which reason, were sent to San Carlos in March they could no longer yield an average

production, as stated by the Central, and, naturally, the best evidence as to whether the cane is still
use full is not the theory of how long it will last, but the result of the milling.
In "Cane Sugar," by Noel Deerr, page 29, it is said:
The harvest season generally extends over a period of four to six months and exceptionally in the
arid localities may be continued over the whole year with such stops only as are required for
overhaul and repairs. At the beginning of the crop an unripe cane of lower sugar content is
harvested; the percentage of sugar gradually increases and is usually at a maximum in the third and
fourth months of harvest, after which it increases as the cane becomes over-ripe. Taking Cuba as an
example, in December the cane will contain from 10 per cent toll per cent of sugar, the maximum of
14-15 per cent being obtained in March and April, after which a fall occurs, which is very rapid if the
crop is prolonged after the seasonal mid-year rains fall. It is easy to see that the combined questions
of factory capacity, capital lost, duration of harvest, and yield per cent on cane form a most important
economic problem, which is usually further complicated by a deficiency in the labour supply.
Early observations, later confirmed by chemists upon the establishment of sugar centrals in this
province, coincide with Mr. Deerr's theory, because, after the cane is ripe, what is called a
"reversion" takes place in the juice or the saccharose is converted into glucose, which takes place
very rapidly, the cane becoming more fibrous each time, until it finally dries up and dies.
The plaintiffs Ferrer claim to have lost 120 lacsas of sugar cane, and the plaintiffs Puentebella,
allege a loss of 115 lacsas (a lacsa a unit of 10,000 sugar-cane plants) which they both testified
having planted in their respective fields. In regard to the former's plants in the affidavit of Antonio M.
Lizares, then an employee of Esteban de la Rama, defendants' Exhibit 4, it is said that the witness
inspected the Canquinto Estate of Francisco Ferrer and found about 60 lacsas of stalks which,
according to his calculation, should produce from 25 to 30 piculs of sugar each, which corroborates
the testimony of Francisco Ferrer that he planted 70 lacsas on the Canquinto Estate, and does to
contradict the testimony of this same witness that his mother, Juliana Puentebella, planted
thirtylacsas on the Mamposod land, while his brother planted twenty lacsas on the Ampanan land,
making a total of 120 lacsas, which lands in Canquinto, Mamposod and Ampanan, according to the
testimony of Francisco Ferrer himself, are respectively, those mortgaged by them to the Hijos de I.
de la Rama by virtue of the documents, Exhibits 19, 20 and 21 and that, according to the stipulations
made in Exhibits 19, and 21 and the interpretation that has been given to Exhibit 20, the mortgagors
bound themselves to plant sugar cane. This testimony of Francisco Ferrer is also corroborated by
Rosario Sanz, who testified having seen 100 lacsas of sugar cane on Ferrer's land in March, 1922,
which were over-ripe, but if milled in said month would, nevertheless, have produced 40 piculs of
sugar per lacsa, and would have produced 50 piculs had they been milled at the proper time. In
regard to the cane of the plaintiffs Puentebella, it appears that in March, 1922, they asked the
witness Simeon S. de Paula to inspect their fields. He testified not less than 100 lacsas and which
might have produced 50 when it was ripe, but they were then going out of season. In exhibit 5, the
affidavit of Gerardo Alunan, Uldarico Suison and Antonio Lizares, them employees of Mr. De la
Rama, it is stated that they went to a place called Baldosa where they received the information that
there was a field of 17,000 plants, and that they were informed at the Cervantes Estate that
48 lacsas of sugar-cane plants had been brought from Cadiz and had been planted in five fields, and
that more than 7,000 plants were brought from Jonobjonob, making, therefore, a total of
fiftylacsas and four thousand sugar cane plants. But, it may be seen, that all that is stated in this
affidavit in regard to the quantity of plants is mere hearsay and is not a act personally observed by
the informants. It does not controvert the estimate of Simeon S. de Paula, nor of Dionisio Patrata
who accompanied the former on the inspection of the fields of the plaintiffs Puentebella, in March,
1922, who likewise estimated that there were 100lacsas of cane on the Cervantes Estate, which
should have produced 5,000 piculs of sugar had the cane been milled in due time; nor does it

contradict the testimony if Jose Alemani to the effect that at a place higher up adjoining his land, the
plaintiffs then had three fields planted with thirteen or fourteen lacsas. It is true that Esteban de la
Rama testified that the Puentebella fields visited by him contained only about seven lacsas, but it
appears that this assertion is of little value, as it may be inferred that his visit did not extend to all of
the planted fields; besides, his estimate does not come anywhere near that contained in the affidavit
of his representatives, Exhibit 5.
Antonio M. Lizares, in his affidavit, Exhibit 4, estimates an average of thirty piculs of sugar
per lacsa from Ferrer's cane, but made no estimate in his affidavit Exhibit 5, in regard to
Puentebella's cane. But from this estimate , as compared with that of German Carballo, Simeon S.
de Paula, Rosario Sanz, and Dionisio Patrata, all sugar growers, some with considerable experience
in the cultivation of sugar cane, who also inspected the plaintiffs' cane , and who unanimously stated
that a lacsa of cane produces 50 piculs of sugar, none of them having a any interest in these cases
nor any proven motives for favoring or opposing any of the parties, it seems that the preponderance
of judgment is in favor of the latter. Consequently, the 120 lacsas of sugar-cane stalks belonging to
the plaintiffs Ferrer should have produced 6,000 piculs of sugar, from which 45 per cent must be
deducted which, in accordance with the contracts, belongs to the central, leaving a balance of 3,300
piculs. The 115 lacsasof the plaintiffs Puentebella should have produced 5,750 piculs of sugar, of
which 45 per cent belongs to the central, leaving a balance of 3,162.50 piculs. The parties having
agreed in the stipulation of facts that the price of the 1921-22 crop was P10.50 a picul of centrifugal
sugar, the plaintiffs Ferrer should have obtained, as a product, P34,650 and the Puentebellas
P33,206.25. From these amounts must be deducted the expenses of raising the crop and putting the
sugar on the market in Iloilo, at the rate of P1.50 per picul, or P9,000 and P8,625, respectively,
leaving a net balance, therefore, of P25,650 for the former and P24,631.25 for the latter.
The plaintiffs allege, furthermore, that on account of not having harvested their crops, they could not
prepare their fields for the cultivation of the ratoon crop for the agricultural year of 1922-23, an
having lost the crop for that year, they pray for damages for such loss. The defendants likewise set
up a counterclaim for damages for the loss of the central's share of the plaintiffs's crop for the
agricultural year of 1922-1923 by reason of the plaintiffs' failure to prepare their fields. The plaintiffs,
not having prepared their fields for the ratoon crops or to cultivate the same, the ratoons requiring as
much cultivation as new planting, nor performed any work, nor invested any capital, it is obvious that
they are not entitled to any indemnity for claim any share in a supposed crop of 1922-23, nor recover
by the defendants' own acts in violating their contracts with the plaintiffs.
In support of the defendants' counterclaim in regard to the plaintiffs Ferrer, there were presented,
Exhibit 19, which is a mortgage to secure a loan for the sum of P25,000, with interest at 12 per cent
per annum, payable annually, during ten agricultural years, executed by the plaintiff Juliana
Puentebella Vda. de Ferrer, in favor or that the debtor shall pay 15 per cent of such amounts as may
be claimed, in case of litigation, for attorney's fees and expenses; Exhibit 20, which is a mortgage to
secure per annum, payable within ten years, executed by the deceased Pedro Ferrer in favor of the
Hijos de I. de la Rama; and Exhibit 21, which is also a mortgage for the sum of P12,500, with
interest at 12 percent per annum, likewise payable annually during ten agricultural years, and which
mortgage was executed by Francisco Ferrer in favor of the Hijos de I. de la Rama it having been
furthermore stipulated therein that, in case of litigation, the debtor should pay 15 per cent of such
amounts as may be claimed, for attorney's fees and the expenses of litigation; and in regard to the
plaintiffs Puentebella, Exhibit B was introduced which is a mortgage for the sum of P30,000 with
interest at 12 per cent per annum, payable annually during twenty agricultural years, it having been
further stipulated that in case of litigation, the debtor shall pay 15 per cent of such amounts as may
claimed, for attorney's fees and expenses; and Exhibit 18, which is a statement of the partial receipts
and payments made by the plaintiffs, to wit:

1920

Nature of transaction

Debit

Credit

Balance

June 18,

Received on account .........................

5,000.00

............

5,000

July 2,

Received on account .........................

5,000.00

............

10,000

July 31,

Double plough ....................................

323.00

............

10,323

Aug. 8,

1 tractor .................................................

3,978.00

............

14,301

Aug. 23,

Received on account .........................

5,000.00

............

19,301

Sept. 13,

Received on account .........................

2,500.00

............

21,801

Sept. 22,

Received on account .........................

1,400.00

............

23,201

Oct. 4,

Received on account .........................

900.00

............

24,101

Oct. 18,

Received on account .........................

2,000.00

............

26,101

Nov. 17,

Received on account .........................

2,000.00

............

28,101

Nov. 17,

Received on account .........................

............

500.00

28,601

Received on account .........................

............

500.00

28,101

Received on account .........................

323.00

............

27,778

Received on account .........................

2,222.00

............

30,000

Received on account .........................

1,590.00

............

31,590

Dec. 8,
1921

It will be observed that the installments in these contracts are not due, but as the plaintiffs
themselves, in their respective complaints, ask for the cancellation of the contracts, it is clear that
they have tacitly renounce the terms agreed upon. It is not believed, however, that the
counterclaimants are entitled to any amount for attorney's fees and expenses of litigation as
stipulated in the contracts Exhibits B, 19 and 21, because these two cases having been brought by
the plaintiffs for violation of said contracts by the defendants, it would not be equitable and just
their non-fulfillment of the contracts being the determining cause of the actionto award them any
amount for attorney's fees and expenses to defend these actions, which would not have arisen had
the defendants been loyal to their contracted obligations.
The mortgage loans earn interest at the rate of 12 per cent per annum, while the most that the
defendants can be ordered to pay the plaintiffs on the amounts claimed by them is legal interest from
the filing of the complaints herein, a circumstance which would place Mr. De la Rama in an
advantageous position if the amounts claimed by the parties time the damages were caused. Such
set-off is believed to be equitable because, as a matter of fact, were it not for the defendants'
nonfulfillment of their obligations, said plaintiffs have lost their respective crops, or contracted the lost
through the fault, delinquency, or violation of the contracts by their creditors themselves, which are
legal causes, against the guilty party.
In view of the foregoing, the following judgment is rendered.
In regard to the complaint in case No. 2911,

(1) The defendant Esteban de la Rama is ordered to pay the plaintiffs the sum of P25,650,
and the costs of this action;
(2) In regard to the cross-complaint the plaintiffs are ordered to pay Esteban de la Rama, to
wit: Juliana Vda. de Ferrer, the sum of P25,000, with interest at 12 per cent per annum from
August 3, 1920, the date of the receipt of this amount (Exhibit 22); Pedro Ferrer, the sum of
P12,500 with interest at 12 per cent per annum from August 3, 1920 (Exhibit 23), and
Francisco Ferrer, the sum of P12,500, with interest at 12 per cent per annum from August 3,
1920 (Exhibit 24);
(3) The counterclaim for damages is dismissed and it is ordered that the amounts awarded to
the plaintiffs and the principal of the mortgage loan, which they are hereby ordered to pay,
compensate each other proportionately up to the concurrent amount, said compensation to
be effective as of April 1, 1922; and
(4) It is ordered that the balance from the compensation be deposited with the court by the
plaintiffs within three months from the date hereof, with the admonition that failing to do so
the sale of the mortgaged property will be ordered and the proceeds thereof applied to the
amount of this judgment with respect to the counterclaim.
In regard to the complaint in case No. 2912,
(1) The defendant Esteban de la Rama is ordered to pay the plaintiffs the sum of P24,581.25
and the costs of this action;
(2) In regard to the cross-complaint, the plaintiffs are ordered to pay Esteban de la Rama the
sum of P31,590, with interest at 12 percent per annum from the various dates of the partial
receipts, as shown by Exhibit 18, quoted herein;
(3) The counterclaim for damages is dismissed and it is ordered that the amounts awarded to
the plaintiffs and the ordered to pay, compensate each other proportionately up to the
concurrent amount, said compensation to be effective as of April 1, 1922.
The plaintiffs under their first three assignments of error maintain that they are entitled to damages
for the loss of the ratoon crop for the year 1923, but we agree with the court below that such
damages are too remote. It is further to be noted that plaintiffs made no effort to reduce the loss for
1923 by cultivating the ratoons or by again planting the land to cane or other crops after the failure of
the 1922 cane crop and it is elementary that a party injured by a breach of contract cannot recover
damages for any loss which he might have avoided with ordinary care and reasonable expense.
(Warren vs. Stoddard, 105 U. S., 224.) Assuming for the sake of the argument that the damages
claimed were not too remote, there is no evidence sufficiently showing what the amount of the
recoverable damages would have been if the plaintiffs had done their duty and sought to minimize
the losses.
The plaintiff-appellants' fourth assignment of error is evidently the result of carelessness in reading
the appealed judgment and need not be discussed.
The defendant-appellants present the following assignments of error:
I. The court below committed an error in rendering judgment in case G.R. No. 26217 against
Esteban de la Rama, ignoring the Negros Coal Co.

II. The court below committed an error in holding that the defendants were obliged, by the
terms of the contracts Exhibits A and B, to grind the plaintiffs' sugar cane in 1921.
III. Even supposing that the defendants were obliged to grind the plaintiffs' cane in the
central of the Negros Coal Company, the court below committed an error in holding the
defendants liable for damages for not having completed the central in 1921.
IV. The court below committed an error in not dismissing the complaint of Messrs. Ferrer
(G.R. No. 26217), the plaintiffs not having complied with the condition precedent to submit
their difference to arbitrators before filing their complaint.
V. Even supposing that the defendants were liable for damages, the court below committed
an error in ordering Esteban de la Rama to pay Messrs. Ferrer the sum of P25,650, and to
Messrs. Puentebella the sum of P24,581.25, by way of damages.
The questions raised by the assignments quoted are fully discussed in the decision of the court
below and hardly require further elucidation. As to the first assignment, we may say, however, that
aside from the fact that the Negros Coal Co., Ltd. has been dissolved and that De la Rama figures
as its successor in interest and liabilities, it is further to be noted that the losses suffered by the
plaintiffs were due to De la Rama's misleading representations and to his failure to fulfill his
promises. In these circumstance, it was not error to give judgment for damages against him and not
against the Negros Coal Co., Ltd.
The fourth assignment of error is likewise without merit. The arbitration clause in paragraph 17 of the
Ferrer contract, Exhibit A, expressly provides that the parties shall "abide by the decision of said
arbitrators or any three of them, as he case may be." The clause does not merely to the courts; it
provides for a final determination of legal rights by arbitration. In other words, an attempt was make
to take the disputes between the parties out of the jurisdiction of the courts. An agreement to that
effect is contrary to public policy and is not binding upon the parties.
The defendant-appellants' other assignments of error relate only to questions of fact in regard to
which the findings of the court below are fully sustained by the evidence. The judgment appealed
from is affirmed without costs to any of the parties. So ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.

14. G.R. No. 120262 July 17, 1997

PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and LEOVIGILDO A. PANTEJO, respondents.

REGALADO, J.:
In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) seeks to set aside the decision of
respondent Court of Appeals, 1 promulgated on December 29, 1994, which affirmed the award for
damages made by the trial court in favor of herein private respondent Leovegildo A. Pantejo.

On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao City, boarded a PAL
plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight
to Surigao City However, due to typhoon Osang, the connecting flight to Surigao City was cancelled.
To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of
P100.00 and, the next day, P200.00, for their expected stay of two days in Cebu. Respondent
Pantejo requested instead that he be billeted in a hotel at PAL's expense because he did not have
cash with him at that time, but PAL refused. Thus, respondent Pantejo was forced to seek and
accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room
with the latter at Sky View Hotel with the promise to pay his share of the expenses upon reaching
Surigao.
On October 25, 1988 when the flight for Surigao was resumed, respondent Pantejo came to know
that the hotel expenses of his co-passengers, one Superintendent Ernesto Gonzales and a certain
Mrs. Gloria Rocha, an auditor of the Philippine National Bank, were reimbursed by PAL. At this point,
respondent Pantejo informed Oscar Jereza, PAL's Manager for Departure Services at Mactan Airport
and who was in charge of cancelled flights, that he was going to sue the airline for discriminating
against him. It was only then that Jereza offered to pay respondent Pantejo P300.00 which, due to
the ordeal and anguish he had undergone, the latter decline.
On March 18, 1991, the Regional Trial Court of Surigao City, Branch 30, rendered judgment in the
action for damages filed by respondent Pantejo against herein petitioner, Philippine Airlines, Inc.,
ordering the latter to pay Pantejo P300.00 for actual damages, P150,000.00 as moral damages,
P100,000.00 as exemplary damages, P15,000.00 as attorney's fees, and 6% interest from the time
of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit. 2 On
appeal, respondent court affirmed the decision of the court a quo, but with the exclusion of the award of
attorney's fees and litigation expenses.
The main issue posed for resolution is whether petitioner airlines acted in bad faith when it failed and
refused to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel
expenses incurred by reason of the cancellation of its connecting flight to Surigao City due to force
majeure.
To begin with, it must be emphasized that a contract to transport passengers is quite different in kind
and degree from any other contractual relation, and this is because of the relation which an air
carrier sustain with the public. Its business is mainly with the travelling public. It invites people to
avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's employees naturally
could give ground for an action for damages. 3
In ruling for respondent Pantejo, both the trial court and the Court of Appeals found that herein
petitioner acted in bad faith in refusing to provide hotel accommodations for respondent Pantejo or to
reimburse him for hotel expenses incurred despite and in contrast to the fact that other passengers
were so favored.
In declaring that bad faith existed, respondent court took into consideration the following factual
circumstances:

1. Contrary to petitioner's claim that cash assistance was given instead because of non-availability of
rooms in hotels where petitioner had existing tie-ups, the evidence shows that Sky View Hotel,
where respondent Pantejo was billeted, had plenty of rooms available.
2. It is not true that the P300.00 Paid to Ernesto Gonzales, a co-passenger of respondent, was a
refund for his plane ticket, the truth being that it was a reimbursement for hotel and meal expenses.
3. It is likewise not denied that said Gonzales and herein respondent came to know about the
reimbursements only because another passenger, Mrs. Rocha, informed them that she was able to
obtain the refund for her own hotel expenses.
4. Petitioner offered to pay P300.00 to private respondent only after he had confronted the airline's
manager about the discrimination committed against him, which the latter realized was an actionable
wrong.
5. Service Voucher No. 199351, presented by petitioner to prove that it gave cash assistance to its
passengers, was based merely on the list of passengers already given cash assistance and was
purportedly prepared at around 10:00 A.M. of October 23, 1988. This was two
hours before respondent came to know of the cancellation of his flight to Surigao, hence private
respondent could not have possibly refused the same. 4
It must be stressed that these factual findings, which are supported by substantial evidence, are
binding, final and conclusive upon this Court absent any reason, and we find none, why this settled
evidential rule should not apply.
Petitioner theorizes that the hotel accommodations or cash assistance given in case a flight is
cancelled is in the nature of an amenity and is merely a privilege that may be extended at its own
discretion, but never a right that may be demanded by its passengers. Thus, when respondent
Pantejo was offered cash assistance and he refused it, petitioner cannot be held liable for whatever
befell respondent Pantejo on that fateful day, because it was merely exercising its discretion when it
opted to just give cash assistance to its passengers.
Assuming arguendo that the airline passengers have no vested right to these amenities in case a
flight is cancelled due to force majeure, what makes petitioner liable for damages in this particular
case and under the facts obtaining herein is its blatant refusal to accord the so-called amenities
equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying
reason was advanced for such discriminatory and prejudicial conduct.
More importantly, it has been sufficiently established that it is petitioner's standard company policy,
whenever a flight has been cancelled, to extend to its hapless passengers cash assistance or to
provide them accommodations in hotels with which it has existing tie-ups. In fact, petitioner's Mactan
Airport Manager for departure services, Oscar Jereza, admitted that PAL has an existing
arrangement with hotels to accommodate stranded passengers, 5 and that the hotel bills of Ernesto
Gonzales were reimbursed 6 obviously pursuant to that policy.
Also, two witnesses presented by respondent, Teresita Azarcon and Nerie Bol, testified that
sometime in November, 1988, when their flight from Cebu to Surigao was cancelled, they were
billeted at Rajah Hotel for two nights and three days at the expense of PAL. 7 This was never denied
by PAL.

Further, Ernesto Gonzales, the aforementioned co-passenger of respondent on that fateful flight,
testified that based on his previous experience hotel accommodations were extended by PAL to its
stranded passengers either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we view as
impressed with dubiety PAL's present attempt to represent such emergency assistance as being
merely ex gratia and not ex debito.
While petitioner now insists that the passengers were duly informed that they would be reimbursed
for their hotel expenses, it miserably and significantly failed to explain why the other passengers
were given reimbursement while private respondent was not. Although Gonzales was subsequently
given a refund, this was only so because he came to know about it by accident through Mrs. Rocha,
as earlier explained.
Petitioner could only offer the strained and flimsy pretext that possibly the passengers were not
listening when the announcement was made. This is absurd because when respondent Pantejo
came to know that his flight had been cancelled, he immediately proceeded to petitioner's office and
requested for hotel accommodations. He was not only refused accommodations, but he was not
even informed that he may later on be reimbursed for his hotel expenses. This explains why his copassenger, Andoni Dumlao, offered to answer for respondent's hotel bill and the latter promised to
pay him when they arrive in Surigao. Had both know that they would be reimbursed by the airline,
such arrangement would not have been necessary.
Respondent Court of Appeals thus correctly concluded that the refund of hotel expenses was
surreptitiously and discriminatorily made by herein petitioner since the same was not made known to
everyone, except through word of mouth to a handful of passengers. This is a sad commentary on
the quality of service and professionalism of an airline company, which is the country's flag carrier at
that.
On the bases of all the foregoing, the inescapable conclusion is that petitioner acted in bad faith in
disregarding its duties as a common carrier to its passengers and in discriminating against herein
respondent Pantejo. It was even oblivious to the fact that this respondent was exposed to humiliation
and embarrassment especially because of his government position and social prominence, which
altogether necessarily subjected him to ridicule, shame and anguish. It remains uncontroverted that
at the time of the incident, herein respondent was then the City Prosecutor of Surigao City, and that
he is a member of the Philippine Jaycee Senate, past Lt. Governor of the Kiwanis Club of Surigao, a
past Master of the Mount Diwata Lodge of Free Masons of the Philippines, member of the Philippine
National Red Cross, Surigao Chapter,
and past Chairman of the Boy Scouts of the Philippines, Surigao del Norte Chapter. 8
It is likewise claimed that the moral and exemplary damages awarded to respondent Pantejo are
excessive and unwarranted on the ground that respondent is not totally blameless because of his
refusal to accept the P100.00 cash assistance which was inceptively offered to him. It bears
emphasis that respondent Pantejo had every right to make such refusal since it evidently could not
meet his needs and that was all that PAL claimed it could offer.
His refusal to accept the P300.00 proffered as an afterthought when he threatened suit was justified
by his resentment when he belatedly found out that his co-passengers were reimbursed for hotel
expenses and he was not. Worse, he would not even have known about it were it not for a copassenger who verbally told him that she was reimbursed by the airline for hotel and meal expenses.
It may even be said that the amounts, the time and the circumstances under which those amounts

were offered could not salve the moral wounds inflicted by PAL on private respondent but even
approximated insult added to injury.
The discriminatory act of petitioner against respondent ineludibly makes the former liable for moral
damages under Article 21 in relation to Article 2219 (10) of the Civil Code. 9 As held in Alitalia
Airways vs. CA, et al., 10 such inattention to and lack of care by petitioner airline for the interest of its
passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to
bad faith which entitles the passenger to the award of moral damages.
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant.
They are awarded only to allow the former to obtain means, diversion, or amusements that will serve
to alleviate the moral suffering he has undergone due to the defendant's culpable action and must,
perforce, be proportional to the suffering inflicted. 11 However, substantial damages do not translate into
excessive damages. 12 Except for attorney's fees and costs of suit, it will be noted that the Court of
Appeals affirmed point by point the factual findings of the lower court upon which the award of damages
had been based. 13 We, therefore, see no reason to modify the award of damages made by the trial court.
Under the peculiar circumstances of this case, we are convinced that the awards for actual, moral
and exemplary damages granted in the judgment of respondent court, for the reasons meticulously
analyzed and thoroughly explained in its decision, are just and equitable. It is high time that the
travelling public is afforded protection and that the duties of common carriers, long detailed in our
previous laws and jurisprudence and thereafter collated and specifically catalogued in our Civil Code
in 1950, be enforced through appropriate sanctions.
We agree, however, with the contention that the interest of 6% imposed by respondent court should
be computed from the date of rendition of judgment and not from the filing of the complaint. The rule
has been laid down inEastern Shipping Lines, Inc. vs. Court of Appeals, et al. 14 that:
When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
This is because at the time of the filing of the complaint, the amount of damages to which plaintiff
may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and
determined by the court, and only after the presentation of proof thereon. 15
WHEREFORE, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED,
subject to the MODIFICATION regarding the computation of the 6% legal rate of interest on the
monetary awards granted therein to private respondent
SO ORDERED.

Romero and Puno, JJ., concur.

Mendoza, J., took no part.
Torres, Jr., J., is on leave.

13. G.R. No. R-190-P September 15, 1987

HON. JAMES B. PAJARES vs. DEPUTY SHERIFF ELIZER ALIPANTE
Facts:
Elizer Alipante, Deputy Sheriff of Camarines Sur, was charged with dishonesty, dereliction of duty
and conduct prejudicial to the best interest of the service under a sworn complaint filed by Judge
James Pajares, RTC Branch 19, Naga City. The case was referred for investigation, report and
recommendation to the Executive Judge of the Regional Trial Court at Naga City. Hearings were
held on the matter before Acting Executive Judge Juan Llaguno, at which respondent was
represented by counsel.
On the basis of the evidence adduced before him, the Investigating Judge opined that the guilt of the
respondent for neglect of duty and inefficiency and incompetence in the performance of official
duties, had been sufficiently established. According to him, the evidence proved that respondent as
deputy sheriff undertook to enforce a writ of preliminary attachment issued in Civil Case No. 1449 of
the Court of First Instance entitled "Freshie Sta. Rosa-Yador v. Dario M. Javier, et al.," that pursuant
to the writ he levied on several items of personalty in the possession of two of the defendants on
May 12, 1982; that he deposited the articles in a private warehouse owned by Samson Cagonia, at
Naga City; that somehow, and without respondent's knowledge, the plaintiff were thereafter able to
withdraw the property from the warehouse, and respondent sheriff has since been unable to locate
and retrieve the same; and that respondent failed to file a return on the writ of preliminary
attachment, bestirring himself to do so only when required to do so under threat of disciplinary action
by the complaint Judge, by Order dated March 1, 1984. The Investigating Judge also rejected
respondent's proferred excuse of pressure of work for his failure to file his report on his
implementation of the writ of attachment, as well as his claim that his inability to retain official
custody of the attached property was rendered inconsequential by the fact that an amicable
settlement had been subsequently reached by the parties concerned and the plaintiffs had credited
the defendants with the value of the property levied on.
The Investigating Judge however declared the other charges against respondent as not having been
adequately substantiated by the evidence submitted.
We find no cogent reason after reviewing the record to disturb His Honor's findings. We agree that
the respondent is guilty of gross negligence and conduct seriously prejudicial to the best interest of
the service. The evidence shows respondent to have been completely unmindful of his duties, so
indifferent to his responsibilities as to be scornful of them, and utterly uncaring of the rights of the
parties. He has by his conduct shown himself to be unfit for public service, specially that connected
with the administration of justice, which demands the highest sense of dedication and zeal in the

protection and conservation of the rights and interests of litigants as well as in assuring the efficacy
and integrity of the judicial process.
WHEREFORE, the Court declares respondent guilty of gross negligence and conduct gravely
prejudicial to the service, and ORDAINS HIS DISMISSAL from employment as deputy sheriff, with
perpetual disqualification to hold any other public office, and forfeiture of al benefits otherwise due
him by reason of his service in the Government.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.